Good afternoon, and welcome to the Caleres Third Quarter 2020 Earnings Conference Call. My name is Erica, and I will be your conference coordinator. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. Operator instructions were given. Please be advised that today’s conference is being recorded. Operator instructions were given. At this time, I’ll turn the call over to Logan Bonacorsi, Vice President of Investor Relations. Please go ahead.

Good afternoon. I’d like to thank you for joining our third quarter 2020 earnings call and webcast. A press release with detailed financial tables, as well as our quarterly slide presentation are available at caleres.com. Please be aware today’s discussion contains forward-looking statements, which are subject to a number of risks and uncertainties. Actual results may differ materially due to various risk factors, including, but not limited to, the factors disclosed in the company’s Form 10-K and other filings with the U.S. Securities and Exchange Commission. Please refer to today’s press release and our SEC filings for more information on risk factors and other factors which could impact forward-looking statements. Copies of these reports are available online. The company undertakes no obligation to update any information discussed in this call at any time. Joining me on the call today is Diane Sullivan, CEO, President and Chairman; and Ken Hannah, Senior Vice President and CFO. We will begin the call with brief prepared remarks, and thereafter, we’ll be happy to take your questions. I would now like to turn the call over to Diane.

Thanks, Logan, and good afternoon, everyone. We appreciate you joining us on today’s call. I want to first begin by thanking the Caleres team for their outstanding performance in recent months, under what are quite obviously extremely difficult circumstances. As you can see from our results, our people have risen to the challenge in an impressive way, responding quickly and effectively to the rapidly changing footwear market, driving our performance forward while at the same time negotiating the increasingly complex personal lives that I think everybody finds themselves grappling with. We are truly fortunate to have such a resilient, dedicated, and talented team. Because of their efforts, there is lots of good news to discuss on the operational and financial front. During the third quarter, we maintained our progress and continued our recovery, delivering solid and improving sequential results across most key financial metrics. Most notably, we reported sharply higher net income with adjusted earnings of $0.48 per share. We also achieved a 30% sequential increase in revenues as the top line benefited from the return to full operation of our store network, the full reopening of our partners’ stores, solid digital demand as well as an extended back-to-school purchasing season. At the same time, we maintained our intense focus on driving down costs, achieving a $38 million reduction in overall expenses during the quarter. Through these efforts, we again generated a significant amount of free cash flow, achieving the highest level of third quarter cash generation in 10 years and put that cash to use further strengthening the balance sheet and reducing overall indebtedness. In total, we paid down $50 million of debt during the quarter, bringing overall debt reduction to nearly $140 million since the beginning of the second quarter. Now let’s turn to our business segments where we will start with a review of our Famous Footwear results. Famous continued to benefit from our inherent competitive advantages, which included a strong offering of in-demand brands and an advantaged assortment of sport performance and casual oriented styles and convenient and safe store locations that are situated largely off-mall. In fact, the segment turned in $391.7 million in revenues for the third quarter, representing a roughly 12% year-over-year decline, but coming in well ahead of our expectations for the period and increasing 17% from the second quarter of this year. This was even with the loss of an equivalent of 1,700 business days in the period due to store closures related to illness, weather, fire, and civil unrest, which restricted our sales by approximately $6 million. Perhaps most notably is that Famous’ third quarter operating earnings were nearly $200,000 better than last year despite the sales decline due to our ongoing conservative approach to expenses, as well as very prudent inventory management. During the quarter, we continued to lean into our digital capabilities and while our e-commerce sales moderated from the high levels achieved while the store network was closed, we realized a 48% year-over-year improvement at Famous. In addition, e-commerce penetration reached 17% of net sales, up from just 10% in the third quarter of last year. Looking at the quarter in more detail, as with most things this year, the back-to-school season was absolutely far from normal. And as we alluded to in our second quarter call, back-to-school purchasing got off to an extremely slow start in August and uncertainty around the format of this school year cast a pretty wide shadow over the marketplace. And in fact, this uncertainty led to store-for-store sales for that month to come in well below our historical August sales levels. However, as we progressed through September, higher sales started to materialize much ahead of our expectations as children headed back to classrooms and as consumers felt more comfortable venturing out into the world. Notably, September sales exceeded last year’s levels by approximately $15 million with store-for-store sales up 16.9%, providing a partial offset to the declines that we saw in August. After five straight weeks of sales better or equal to last year, sales momentum in the last month of the quarter started to slow, as traffic in stores declined and rising virus cases in certain parts of the country started to dampen consumer demand. All that said, the cadence of the quarter was: sales in August were down double-digits, sales in September were up double-digits, and sales in October declined single-digits. Now in the quarter, as it relates to brand trends, as we know during times of uncertainty, we continue to see consumers seek out quality brands that they know and love and Famous is perfectly positioned to fulfill those ongoing needs. In fact, our top 10 brands represented 70% of our total sales. And just as in the second quarter, consumers were still gravitating towards athletic, sport and casual styles. They are shopping with intent. In fact, year-over-year conversion rates were up both in-store and online. A notable bright spot also during the period was the increase in our kids penetration, rising to nearly 19% and further heightening the extended nature of our back-to-school season. Now, looking ahead, we understand fully that uncertainty remains and renewed local restrictions in areas where the virus had surges are starting to be reinstated. And as has been our position from the start, the health and wellbeing of our associates, customers and communities is our top priority. We are continuing to take appropriate precautions as it relates to safety. We are closely watching the numbers in the regions where our stores are located and we’ll follow local government guidelines when it comes to the operations of our stores. We currently have 11 stores that have reclosed due to local mandates. While store closures may increase as we approach the holidays, we are confident that with our recent experience, disciplined cost approach and customer service options we will weather whatever may happen in the coming weeks or months. Now before moving to our results in the Brand Portfolio, I’d like to just take a quick moment to say how excited we are that Mike Edwards is going to be leading Famous going forward. He certainly is the popular choice here at Caleres internally and I think so also with our partners. His tremendous experience and knowledge about our business from so many different angles is going to be essential to building Famous’ future growth and success. Now turning to the Brand Portfolio’s performance. For the quarter, we delivered better-than-expected results with net sales declining approximately 26%, compared to the third quarter of last year, but improving 45% sequentially. We turned in positive operating earnings of $7.3 million, further highlighting the progress in our wholesale business and our ongoing focus on cost control initiatives. The stronger than anticipated results were driven by positive consumer reaction to our athletic, sport and casual products, as well as improving performances from Vionic, Sam Edelman, Ryka, Blowfish and Vince, among others, and increased shipments to strategic retail partners that we’re working with to align their inventory levels with consumer demand. Moreover, we continue to manage our portfolio inventory levels in a very strategic manner, ending the quarter down 36% from last year’s levels. We feel confident we can continue to weather the ongoing imbalance in the supply chain throughout the rest of the year. In addition, I’d also like to highlight that during the quarter, our Wellness and Comfort brands continued to perform well as the consumer demands these products. In fact, our Wellness and Comfort brands represented about 55% of our portfolio versus 47% last year. More specifically, it was terrific to see Vionic recording more than a 50% improvement in e-commerce sales. Next, consumers are reacting to what’s new right now. Our new product offerings are certainly resonating with them. For example, Allen Edmonds recently launched its Park Avenue sneaker, which is currently sold out and on back order. In addition, our Ryka athletic brand has been outstanding and has furthered its progress with the launch of a Trail sneaker that’s also doing very well. And as you would expect, the Vince brand’s cozy fuzzy styles that everybody is looking for right now, particularly our shearling slipper, are experiencing strong sell-through since coming to market. And finally, a little bit about our boot business, which now represents 37% of the total brand portfolio sales, down from about 47% last year. That was delayed at the start of the quarter by some late deliveries. However, since that time we’ve seen strong selling trends so far this fall. Not surprisingly, Luxe boots have been driving the strength with casual booties as well as cold weather styles really leading the way. Sam Edelman experienced marked sequential improvement, highlighting the heightened demand for its fall products, particularly boot styles. In fact, Sam’s new combat boots, The Garrett, was the number one new item released in October according to NPD, and Garrett was in good company with three other Caleres boots from Franco and Naturalizer also taking top spots in the top 10 new items during the month. So now let’s transition to the realignment of our Naturalizer brand. We remain committed to taking a disciplined and strategic approach to managing our portfolio. As we continue to respond to the changing patterns of consumer demand, it was the moment to address Naturalizer’s store footprint. As a result, we recently made the decision to wind down most of our legacy Naturalizer retail brand stores in the U.S. and Canada. Make no mistake, we continue to view the Naturalizer brand as a strong and value-driving component of our portfolio. We’ll be focusing on growing the brand’s e-commerce through naturalizer.com and through our retail partners’ sites. In fact, Naturalizer continues to inspire great brand loyalty. It has a great track record of anticipating and adjusting to consumer preferences and needs. We expect the store closures to be complete by the end of fiscal year 2020, and anticipate savings of $10 million to $12 million per year. As we move into 2021, we expect to reallocate capital and resources to amplify our digital presence, capturing the consumers where they want to shop, intensifying our e-commerce focus, and making sure we’re leveraging those capabilities across the brand portfolio. So all-in, we’re pleased with our progress and pleased that we were able to deliver solid performance in the third quarter. And we begin the fourth quarter appropriately cautious, but confident in our ability to win with the consumer for the balance of the year and heading into next year. As a reminder, the fourth quarter is 10% smaller on average, and we expect sales will be lower sequentially, declining approximately 20%. There is still plenty of work to do as we close out 2020, but we’re excited about the potential for strong ongoing gains as we head into 2021. As you would expect, we will continue to maintain discipline with regard to the management of expenses while appropriately investing in the areas that we expect to give us a strong return on our investments, particularly to grow our digital business. While the risk of uncertainty persists, and in fact in the near-term there’s a lot of conversation about COVID again, we do believe that with our strong cash generation and leaner inventory we are very well-prepared to manage through this period and take advantage of market conditions as they begin to normalize. So in short, we’re taking a cautious approach in the near-term, but very optimistic about the intermediate-term. We have the right portfolio of brands, great operating platform, the talent and we believe the work we’ve done over the last several weeks and months has positioned us well to capitalize on our opportunities and drive our growth and create value for all of our stakeholders. With that, I’d like to turn the call over to Ken for our financial review.

Thank you, Diane. Good afternoon, everyone. Despite facing ongoing pressure from the lingering health crisis, I’m very pleased with the progress we’ve made to improve our competitive position during this period. We remained laser-focused on appropriately managing expenses and working capital. Through these ongoing efforts, we are confident in our ability to weather the uncertainty that still persists today in the marketplace. I’d like to start by providing an update on our liquidity position and capital structure and discuss our third quarter results. And finally, we’ll provide a little additional color on the outlook for the remainder of the year. As we communicated last quarter, we believe deleveraging to be the most value-creating use of cash given the volatility in the marketplace. To that end, during the quarter, we made debt reduction the main priority in our capital allocation process. We paid down $50 million in revolver debt, reducing the outstanding balance to $300 million at the end of the third quarter. Our cash balance of $124.3 million and our $600 million revolving line of credit provide more than adequate liquidity for us to continue to navigate these uncertain times. Looking ahead, we expect to further our debt reduction during the fourth quarter and expect to end fiscal year 2020 with borrowings under our revolving credit facility back to pre-COVID levels. Now moving on to a review of our third quarter financials, we reported earnings per share of $0.38, including $0.10 related to the fair value adjustment associated with the mandatory purchase obligation for Blowfish Malibu. Our adjusted earnings per share in the quarter, excluding this item was $0.48 per share. Our consolidated sales for the third quarter were $647.5 million, down 18.3% from the same period a year ago. Famous Footwear total sales were $391.7 million, down 12.3% from the third quarter of fiscal 2019 as we operate at 35 fewer doors. Our comparable store sales were down 9.1% during the quarter, while Famous Footwear e-commerce sales were up more than 48%. Sales at Famous Footwear improved 17% sequentially, reflecting an extended back-to-school season, solid digital demand, and a full quarter of operating our brick and mortar store fleet post closures. Our Brand Portfolio total sales were $267.6 million, a decrease of 25.6% year-over-year. Sales from the Brand Portfolio improved 45.7% sequentially as our partner stores opened and started to flow orders. Our consolidated gross margin was 39.7% compared to gross margin of 40.4% in the third quarter of fiscal 2019. The 67 basis point decline was due primarily to an increased penetration of e-commerce sales and a continued liquidation of spring inventory. Famous Footwear had a gross profit margin of 40.9%, which compares to a gross margin of 41% in the same period last year. This decrease is driven by the increased penetration of e-commerce related business in the quarter as product margins were higher in store than online. Our Brand Portfolio had gross margin of 35.2% compared to gross margin of 37.2% in the third quarter last year, reflecting aggressive liquidation of our spring inventory. Our consolidated SG&A expense was $236.9 million, representing a decline of approximately $38 million compared to the third quarter of last year. This year-over-year decline was driven by store selling productivity and lower facilities, marketing and corporate expenses. Our third quarter operating earnings were $20.1 million or 3.1% of sales. This compares to adjusted operating income of $44.4 million in the third quarter of 2019. At Famous Footwear, we posted operating earnings of $27.8 million and a 7.1% operating margin, a 91 basis point improvement year-over-year, essentially, as Diane mentioned, $200,000 more operating earnings on $55 million less sales than the third quarter of last year. The Brand Portfolio, we’re pleased to report operating earnings of $7.3 million for the quarter. The operating margin of the Brand Portfolio was 2.7%. The company’s adjusted net income was $18.2 million or earnings per share diluted of $0.48. This compares to adjusted net income of $31.6 million or $0.78 per diluted share last year. As I mentioned earlier, our inventory at quarter end was down 21% and included an 11% decline at Famous Footwear and a 36% decline for our Brand Portfolio, reflecting the ongoing liquidation of seasonal goods and our best efforts to prudently manage our inventory. Net cash provided by operating activities during the quarter was $34.2 million, the largest third quarter level of cash generation in over 10 years. Our capital expenditures in the quarter totaled $6.9 million. Net interest expense for the third quarter was $10.9 million and included $5.1 million of fair value adjustments associated with the Blowfish Malibu purchase obligation. Our consolidated tax rate is 19.8% year-to-date. Our lower tax rate in the quarter primarily reflects the impact of a higher anticipated full year tax benefit driven by the impact of the CARES Act, which allows us to carry back 2020 losses to years with a higher federal income tax rate. In addition to our progress on debt reduction, we also returned approximately $2.7 million to shareholders through our longstanding quarterly dividend. Now given the ongoing uncertainty and risk of new store closures, we will not be providing guidance for the remainder of the year. I’d like to give you some high level perspective regarding our expectations for the fourth quarter. And I’ll start with a reminder that our sales for the fourth quarter are seasonally lower than our third quarter sales and we expect that to be the case again this year. Our net sales are expected to decline approximately 20% year-over-year, very similar to what we experienced in the third quarter. With Famous Footwear, sales are expected to be down between 10% and 15%. And our Brand Portfolio sales are expected to be down between 25% and 30%. We do expect our credit facility outstanding borrowings to return to pre-COVID levels; I’ll remind you, we ended the year last year at $275 million borrowed against the facility. Furthermore, as we discussed, we’ve made the decision to exit our legacy Naturalizer stores in the U.S. and Canada by the end of fiscal 2020. This exit will cost between $20 million and $25 million in pretax charges while delivering $10 million to $12 million in annual pretax benefits. Excluding the impact of the Naturalizer closings and any further shutdowns associated with COVID, we would expect positive adjusted earnings per share in the quarter. In closing, we’re continuing to rapidly adjust to the current and evolving market environment, while furthering our long-term strategic objectives and driving to deliver greater cash generation and value creation in the future. With that, I’d like to turn the call over to the operator for questions.

Operator instructions were given. Your first question is from Laura Champine with Loop Capital.

Thanks for taking my questions. Diane, could you talk a little bit more about the changing management at Famous Footwear? I think that was somewhat of a surprise to me.

Yes. No surprise. Molly Adams, who had been here for a couple of years, did a terrific job and decided to leave the company for another opportunity. Fortunately, Laura, we have a great team and good bench strength there. Mike Edwards has been with the company for about 12 years in a number of different capacities across Famous, including planning and allocation. He served as our Chief Customer Officer for a while and he’s been running our stores. He has a great sense of that brand and its customer and his head and his heart are really in the game to win at Famous. He, along with a terrific group of people there, will continue to drive that business very well into the future.

Got it. Thank you.

Your next question is from Steve Marotta with CL King.

Good evening, Diane, Ken, and Logan. Congratulations on a stellar quarter, really very nicely done in the teeth of what was a difficult time. You’ve given good guidance. You’ve given some great color around the fourth quarter. Just wondering if the November-to-date timeframe has varied significantly from what you expect for the balance of the quarter.

No, I wouldn’t say that. As we’re running quarter-to-date, we’re kind of right in line with what we had laid out. We hesitated to provide too much detail, but we didn’t want to leave everybody out there trying to figure it out themselves. As we mentioned, we have some stores in some areas that have been closed, and we’ve tried to take that into consideration. If we move toward a much larger shutdown, obviously the numbers that we’ve laid out would be off the table.

And that also assumes what travel patterns will be for the holiday season, which I assume is going to be reduced. Just the general trajectory of what’s happening right now. Correct?

Exactly.

Okay. Two other more long-term questions. The first is, to the extent that you can talk about the first-half buying patterns across your wholesale customer universe, including what they expect from a digital component as well. Can you talk a little bit about what you’re seeing there? Open-to-buy dollars are usually set well in advance of November, but I think this is a relatively unique year. Any thoughts that you can give us on how the wholesale business is currently planning and trending would be really helpful.

Okay. Steve, it’s Diane. It’s a little early to talk too much about 2021, but clearly consumer behavior has shifted dramatically to consumers being very comfortable purchasing online. We do not see that changing. We see that penetration of our business continuing to grow at a pretty rapid rate. That’s true both at our Famous business, as well as with our own e-commerce business and with our partners’ businesses. If you talk to people forecasting 2021, they tend to say e-commerce related business will be somewhere between 40% to 50% of someone’s business. I think that’s the biggest structural change we see going forward. The sport, athletic and casual side of life doesn’t look like it’s changing anytime soon, but there will be opportunities for other types of footwear to come back into play as social activities resume. We’re keeping our eye on both the short-term and the medium-term to make sure we take advantage of every opportunity. We are staying innovative with our products because that’s where the consumer interest will be.

And Diane, you touched on my last question, which is how are you thinking and planning for a post-vaccine world? There is a likelihood that consumers will resume social activities and demand could pick up. How do you plan for that, given inventory constraints?

In the short-term, Steve, we like having our wholesale inventory down 36% and Famous inventory where it is; we’d like it to be a bit stronger on some top 10 brands where we’re a little light. In general, we’re going to continue to play it close to the vest on inventory and watch it very carefully. We’ll continue to work on our speed-to-consumer program—making sure materials are planned for products we think will be important going forward so we have agility to respond during the season. One of Caleres’ benefits is visibility across many parts of the marketplace, so we can see what’s happening and pivot quickly where the consumer is moving. We’re in a good position, though there’s still a lot of work to do. We like what we accomplished this quarter, but we’re not satisfied. We’ll keep pushing. We believe we can come out a winner when the pandemic is behind us.

Thank you for the color. That’s very helpful.

Thanks, Steve.

Operator instructions were given. Your next question is from Chris Svezia with Wedbush.

Good afternoon, everyone. Nice job in a tough environment.

Thank you.

Thanks, Chris.

A couple things. One, on Naturalizer: when you think about the roughly 20% reduction in revenues for the quarter, what impact did the Naturalizer liquidation have, if at all? Number two, just on Naturalizer retail: in terms of sales, how big is that? And then lastly, are the Naturalizer retail stores profitable? And what do you intend to do with the savings—tend to reinvest that $10 million to $12 million or is that potentially flow-through?

If you step back, we laid out a timeline to close the Naturalizer stores by the end of the fourth quarter. We began some liquidation through our own retail channels and website in the third quarter. Given current inventory levels, we don’t believe we’ll have a problem liquidating the rest of the inventory in those stores between now and the end of the fiscal year. Regarding Naturalizer retail stores, they’ve been significantly impacted this year. We went from stores that were generating a decent amount of revenue to stores with much-reduced traffic, which put pressure on the bottom line. We decided to exit those stores. We will keep a couple of stores in end markets where those consumers are and where we’ve invested. We’re also still looking to grow the brand globally as it has strong recognition.

Chris, to add: when I said it was the moment, I meant that when we looked at the size of that business and the impact COVID had on it, and the other opportunities to move the customer, we felt it was the right decision. We’ll focus on our own website and allocate resources and plans to capture those consumers. We’ll also work with retail partners; there’s opportunity there. A significant portion of our business with strategic partners is already digitally driven, and we see more opportunity to expand that. There are also opportunities in Canada and other places to capture that customer. We have a full plan for this. Some of the $10 million to $12 million in savings will be allocated to capturing customer acquisition and other investments to grow the brand digitally. It’s a combination of things and the timing felt right since many of the stores were legacy retail where we hadn’t invested heavily in recent years.

So from a numbers perspective, am I thinking about the savings running at that $10 million level given where revenue trajectory was, and these stores were losing money? Is that a fair ballpark range for next year?

The revenue impact is a little less than that, just on the top line. We had seen close to 50% declines this year with the shutdown, so performance is well below prior levels. The top-line reduction put a number of those stores into loss positions. We felt like it was about a two-year payback to exit. In the $10 million to $12 million estimate, we considered opportunities to reinvest some of those savings, so we felt the decision was appropriate.

How do you think about stores for Allen Edmonds and Sam Edelman—any opportunities to change their footprints or are you comfortable with what you have?

We continuously look at our entire fleet—Famous, Allen Edmonds, Sam Edelman—to make sure our real estate is profitable. The Naturalizer stores included many outlet locations, which did not align with the current brand positioning. Allen Edmonds remains a critical part of our direct-to-consumer effort and tends to be in more urban locations, so we’ll monitor performance. Sam Edelman is more mall-based and those locations are more challenging. We’ll continue to evaluate and, if needed, make decisions on those footprints.

Adding to that, the Naturalizer stores were largely outlets and didn’t represent what the current brand stands for. That’s not the case for Allen Edmonds and Sam Edelman. All three brands are down from a retail perspective this year, and we’re having conversations with landlords about restructuring leases. Where we can get movement, it will significantly change the financial profile. But Naturalizer was a different scenario than Allen Edmonds and Sam Edelman.

Got it. Just on October trends for Famous, with sales down mid-single digits, how much of that is weather or softness in the boot business versus COVID-related consumer pullback?

It’s hard to isolate exactly, but generally it’s tied more to consumer sentiment overall and rising cases in some areas. We were careful on promotional activity because we were selling through goods at favorable margins, so we didn’t promote heavily.

I think that’s fair. You could see it in traffic and market share data. From an October standpoint, we were able to maintain and in some cases grow market share. I don’t think there’s any other factor beyond consumer sentiment.

Last thing on SG&A: as you think about Q4, and I know you’re not providing much color, to get to profitability excluding some one-time charges, it assumes SG&A is still down materially, maybe similar to Q3. Am I thinking about that right? How much of this is structural versus temporary and likely to come back next year?

We indicated we’re down $38 million in Q3, and in our second quarter call we talked about exiting the year down at least $25 million. If we hold to the roughly $235 million in SG&A that we had in Q3 and Q4, that will be the level. If sales head toward the higher end of reductions, we have the ability to flex SG&A down further. But SG&A won’t be higher in gross dollars than it was in Q3, just to help with modeling.

Okay. All right. That’s all I have for now. Thank you and best wishes for the holiday.

Thanks. You too, Chris.

Thank you, Chris.

Operator instructions were given. Your final question is from Sam Poser with Susquehanna.

Good afternoon. Thanks for taking my questions. I’m going to start with Famous. You said October was down mid-single digits. Could you give more color on where exactly October was? Was it mid-singles, high-singles, low-singles?

It was down mid-singles.

You had a lot of help from back-to-school in August and September. Do you have a combined comp number for August and September to offset that, since that incremental boost probably won’t repeat in the fourth quarter?

Performance really began to improve in the second week of September. There were about five weeks where we were higher than or close to last year’s levels, which is where much of that strength came from. We don’t have a combined August-September comp number in the call script, but we can follow up with you and provide that if helpful.

That would be helpful. And how should we think about Famous store openings and closings in the fourth quarter and next year, in terms of same-store expectations?

We’ve got a few openings and some additional closings. We had talked about being down 45 to 50 stores for the year; year-to-date through the third quarter we were down 29. We have one store opening for sure and one that may push to next year. Looking forward, we’ve continued to close around 45 to 50 stores each year and have reduced new store openings. We’re planning on opening a few—somewhere around the 10 range would be my best guess today. Discussions with landlords continue, and if rents become more realistic, that could give us an opportunity to open more stores.

Thanks. On SG&A cuts at Famous that helped keep EBIT in line with last year: can you give more color? Was it mostly store-level productivity, lower headcount, marketing cuts?

A lot of it was productivity in the stores—getting better productivity out of labor. We did reduce some marketing; we had originally planned to spend a lot on TV and radio for back-to-school but shifted when the season changed. Some of that was transitioned to digital spend, but much was not spent. The rest of the savings came from facilities expense as some stores were closed—year-over-year we were down 35 stores, which contributed as well.

When you say productivity, you mean headcount reductions in stores?

No. I mean labor productivity as a percent of sales—the hours scheduled relative to the sales generated. In many cases, hours were adjusted during the quarter to be more productive.

Understood. On the Brand Portfolio, and looking forward—since Q4 is expected to be slightly worse than Q3—how much of Q3 strength was due to pull-forward of wholesale orders from Q4?

There was a little more demand in Q3 than we had anticipated because some retailers needed inventory on key items, so shipments were a bit higher than planned. We had expected Brand Portfolio down about 30% in Q3, and we came in down about 26%, so a bit better than anticipated. For Q4, we’re thinking in the same range—Brand Portfolio down 25% to 30%—and our inventory levels are down about 36% going into Q4.

Lastly, you indicated Famous sales will be weaker in Q4 year-over-year versus Q3. That’s primarily because you won’t see the back-to-school pickup again, correct?

Yes. We were down about 12% in the third quarter and we’re forecasting Famous Footwear sales to be down between 10% and 15% in the fourth quarter, so roughly in line.

Okay, great. Thank you very much and happy holidays.

Thanks.

Thanks, Sam.

Ladies and gentlemen, this does conclude today’s conference call. Thank you for participating, you may now disconnect.